Supreme Court Public Examination Of Directors Ends

Press, Volume XCIX, Issue 29384, 10 December 1960, Page 4

Supreme Court Public Examination Of Directors Ends

Geoffrey Wade Walker, a builder, said in the Supreme Court yesterday that, two months after the liquidation of the Walker Construction Company, Ltd., he and Eric Philp Wills were appointed directors of another company incorporated to build houses. This company, Country Homes, Ltd., was in a small way, and started with a share capital of £lOO, Walker said.

He was giving evidence during the closing stages of his examination in his capacity as governingdirector of the Walker Construction Company, Ltd. (now in. liquidation). Wills had been previously examined in his capacity as a director of the Walker company. ,

Walker had been in the witness box for nine hours and three-quarters when the examination ended on the fifth day of the hearing before Mr Justice Macarthur.

The public examination of Wills and Walker in relation to the affairs of the Walker Construction Company was on the motion of the official liquidator of the company (Mr E. G. Tyler, formerly Official Assignee at Christchurch), for whom Mr P. T. Mahon appeared. Wills was represented by Mr R. W. Edgley. and Walker by Mr B. McClelland. Their examination was held under the Companies Act, 1955. and under the provisions of section 263. sub-section 6. of that act. their evidence will lie in Court and may be used against them in the event of any further proceedings being taken. Further proceedings, if any, will be on the motion of the official liquidator of the company. Further proceedings may be taken against both Wills and Walk 'r. or either one of them. The record of their evidence is open to inspection by any creditor or contributory, according to the act. When his examination was resumed yesterday, Walker agreed with Mr Mahon that the only annual accounts of his business and the company which showed a profit between 1951 and 1956 were the ones which were amended at his suggestion on the eve of the creditors' meeting on June 29, 1956. The amended Recounts converted a loss into a profit. . “I agree with that, but I must emphasise that I had to correct ~the accounts when I found a mistake. It would have been wrong of me not to.” Walker added.

He agreed the list put in to Court (in pencilled figures was of calculations, written by himself, of work in progress. Timing of Alterations

Mr Mahon: Are you sure that the alterations were not made after Glynne fa public accountant) told you the accounts would show a loss of £155 for the year? Walker: I don’t know and I don’t care . . . The alterations were not made to show a profit but simply because the work in progress figures in the original account were wrong. But I Xvould think the alterations were given to Glynne before the ac-« counts were prepared. Did you alter the figures of work in progress before you knew a loss would be made?—l think so.

To his Honour. Walker said the suggestion was that the balancesheet had been altered fraudulently and he (Walker) wished to refer to two further cash book entries to substantiate the alterations made by him and also to say that W. A. Hadlee, the accountant investigating after the company went into liquidation, pointed these things out to him. Walker agreed with Mr Mahon that the accounts for the original balance-sheet were dated June 25. 1956. and that on June 26 that year someone had typed out the required adjustments and referred specifically to the loss of £155.

Mr Mahon: And you still say you have got no knowledge of how that memorandum on your company’s letterhead came to be drawn up? Walker: I think Glynne typed

He added that he recollected Glynne arriving late at the creditors’ meeting and bringing the typed alterations with him. “I don’t think I was really aware of the full implications of the alterations at the time. I do not think that any reputable accountant like Mr Glynne under any circumstances would allow any wrong figures to go forward.” Walker said. His Honour: Whose is the writting in green ink on the back of the memorandum? Walker: I think it is Glynne’s. And whose handwriting is the alterations in green ink?—l am almost certain it is Glynne’s. Mr Mahon: Glynne had to rely on you for the figures of work in progress? Walker: He certainly did. Do you remember telling the liquidator five or six months ago that you could not remember why you altered the work in progress figures?—lt is quite possible. It is only since I have had occasion to go into things more carefully that these indications have become clearer. Country Homes. Ltd. Are you associated with a company called Country Homes. Ltd?—Yes. Was this company formed eight weeks or so after the Walker company went into liquidation in December. 1956? That would be about right. Are the shareholders of Country Homes. Ltd., Wills. Wolf Bear. Ltd., Joughin, and Glynne? —I think that is correct. I didn’t know this was coming up. Wills is a director of the company? —Yes, or he was at that time. Have you been a director of the company from its incorporation? —I think so. You think so? You still work for the company, don’t you?— Yes. I mean I wasn’t certain whether I was nominated as a director from incorporation. I think you were a director without holding shares in your name? —That is right. Are the shares held by Wills in that company really held in trust for you?—Or for my wife. I can’t remember. You or your wife?—Yes. You made at one time certain advances to Country Homes, Ltd., did you not?—That is correct The first one for a sum of over £7oo?—Probably, I can’t remember. Is that advance recorded in the

company’s accounts as being an advance from Joughin?—l think it probably may have been, but I think it was a mistake which was later rectified. “Genuine Mistake”

Was not the position that you raised the money and named someone else as the lender? —I don’t think so. I think it was a genuine mistake. I don't even remember it being discussed, but. there again. I have nothing with which to refresh my memory. An advance was made by one shareholder when in reality it was made by another?—Yes. Is this company a builder of houses?—Yes, but in a very small way. It was decided to form this company, was it not, late in 1956? —Not that I recall. Well, the company was incorporated finally on February 6, 1957. Would you agree that you and Wills had discussed the formation of another company late in 1956? I think it was done just before incorporation, but I have nothing to refer to to refresh my memory. Mr McClelland submitted that the questioning about Country Homes. Ltd., was not a matter properly raised on the issues for public examination and therefore this evidence could not be part of any subsequent proceedings which might be taken. His Honour noted counsel’s submission. This completed Mr Mahon’s questions. Re-examination Re-examined by Mr McClelland. Walker said the Walker Construction Company went into liquidation almost exactly four years ago. During that time the company’s books had been examined by George Brown, then official liquidator, W. A. Hadlee, public accountant, and Tyler. During those four years he had several personal interviews with all those persons, Walker said, and had co-operated in every way to assist them. Mr McClelland: Was the extent of Hadlee's investigation indicated by the payment shown in the ledger of £4lO 13s 3d? Walker: Yes. During all those four years were all the books and records in the possession of the official liquidator?—They were. You had access to those documents only during the last month?—Y es.

Did Brown (acting official liquidator for a period) inform you that documents other than he retained were to be destroyed?— Yes. He warned me that as far as I was personally concerned the company was finished. Tax Return Walker produced a photostat copy of a tax return for 1952 showing that a tax was paid on profit his business made in 1952. He said he most assuredly thought the Walker company would make a profit when it was incorporated. The only payment he had received for goodwill was for shares in the company. No creditor to his knowledge ever objected to the figure of £lO,OOO goodwill in shares. Walker said he had warned the creditors’ committee that the company was in difficulties in 1955 and 1956 and that output must be maintained or the business would be uneconomic. Denying that Heney, a member of the creditors' committee, had ever used the Walker company for his own business ends as the then managing-director of Ashby. Bergh. Ltd.. Walker said he was certain John Bradley, chairman of the creditors’ committee, would never countenance such proceedings. Walker said he never had any part in the Social Services Council decision whether or not to lend the Walker company money. He kept away from all meetings of the council which discussed the matter. Mr McClelland: What is the share capital of Country Homes, Ltd.? Walker: £lOO. That is the share capital on incorporation. “Not Fraudulent'* Walker reiterated that the altered balance-sheet was not fraudulent and made further references to figures that substantiated the alterations. Mr McClelland Did you at any time alter that work in progress sheet or the balance-sheet with the intention of making a false statement? Walker: I have never been a party to anything like that under any circumstances. To his Honour. Walker said he was now aged 48 and had had three years’ secondary schooling. He had never received any formal training in accountancy or business administration. “I have picked up far more in the course of this investigation than I had ever had,’’ Walker said. He said he bad always been a builder, and began business on his own account about 1945 or 1946. The Court adjourned at 12.30 p.m. and resumed at 4.30 p.m. when Walker signed the Court record as being a true note of his evidence. Counsel agreed with his Honour that the requirements of the act in regard to the hearing of the public examination had been complied with. Icebreaker to Sail.— The United States Coast Guard icebreaker. Eastwind, is expected to leave Lyttelton for McMurdo Sound at 10 today. *